The Federal Trade Commission and the State of Florida on Friday charged a payment processing business with credit card laundering and illegally assisting and facilitating a nationwide debt relief telemarketing scheme that allegedly bilked millions of dollars from consumers.
According to the FTC, when scammers cannot gain or maintain access to the credit card networks through legitimate means, they often turn to illegal credit card laundering as a way to process credit card transactions through another person or entity. The tactic allows the scammer to evade detection and charge the accounts of defrauded consumers. Credit card laundering and helping someone launder are violations of the Telemarketing Sales Rule.
In an amended complaint filed in federal court, the FTC and the State of Florida alleged that CardReady LLC, an independent sales organization, and its executives, Brandon A. Becker, James F. Berland and Andrew S. Padnick, arranged for at least 26 shell merchant accounts to be used to process credit card payments for a debt relief operation the agencies sued in June. The agencies charged the payment processor defendants, as well as E.M. Systems & Services LLC, with credit card laundering under the TSR and illegal factoring of credit card transactions under Florida law. The FTC also charged CardReady and its executives with assisting and facilitating the debt relief scam.
"Our investigation went beyond the telemarketers who swindled consumers out of their money," said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. "We also stopped the credit card processing operation that hid their illegal transactions. Credit card laundering isn’t just bad business – it's against the law."
A federal court halted and froze the assets of the debt relief operation earlier this year.
The complaint named Steven D. Short and his wife, Karissa L. Dyar, as defendants, and their companies, E.M. Systems & Services LLC, Administrative Management & Design LLC, Empirical Data Group Technologies LLC, Epiphany Management Systems LLC and KLS Industries LLC, doing business as Satisfied Services Solutions LLC. It also names Christopher C. Miles and his telemarketing company, One Easy Solution LLC.
The alleged scammers, who used a variety of phony business names with associated websites, cold-called consumers with credit card debt and falsely promised that, for an upfront fee of, on average, between $695 and $1,495, they would save them thousands of dollars by reducing their credit card interest rate. The defendants also allegedly falsely promised to refund consumers’ money if they failed.
The telemarketers identified themselves as "card services," "credit services" and "card member services," or one of the defendants’ phony businesses, according to the complaint.
To win consumers' trust, they said they knew the amount of their credit card debt, provided the caller’s license or badge number, mentioned the Internet domain name of the phony business, and falsely claimed they had a business relationship with consumers’ lenders.
During the call, the defendants billed consumers’ credit cards between $500 and $1500 and promised a specific reduced interest rate and savings amount, such as 6% or lower and $5,000 within 90 days.